NEW YORK (AP) — Yelp’s stock opened to five-star reviews from investors on Friday. Yelp jumped as high as $26 on its first day of trading, far above its initial offering price of $15 a share. The stock of the online restaurant and business guide company finished at $24.52, for a gain of 63 percent.
The San Francisco-based online review site’s initial public offering priced above its targeted range of $12 to $14 per share. That already suggested strong investor demand for a slice of the 8-year-old online reviews site, which has yet to turn a profit.
The offering nets Yelp about $96 million after expenses, the company estimated. Yelp sold 7.1 million shares and its charitable foundation another 50,000. Investment bankers also have an option to buy an additional 1 million shares, depending on investor demand. If those shares are sold, Yelp expects net proceeds of $111.2 million.
The IPO price valued Yelp at $900 million. With Friday’s stock price jump, the San Francisco company is valued at about $1.5 billion. Such a big first-day jump is common for high-profile Internet companies such as Yelp. Stock of LinkedIn Corp., the professional networking service, nearly tripled on its first trading day, reaching as high as $122.70 after pricing at $45.
Though it’s best known for restaurant reviews, Yelp’s users have reviewed churches, strip clubs, hospitals, hotels and high schools. The company makes money from advertising. Most of the ads come from the local businesses that its users review.
In 2011, it booked revenue of $83.3 million, up 74 percent from 2010. It had a net loss of $16.7 million last year and $9.6 million in 2010.
“Yelp’s active community of users writing reviews of local businesses is difficult to replicate,” said Morningstar analyst Rick Summer. “Unfortunately, the company faces challenges translating the small advertising budgets of local businesses into profitability, as about 70 percent of ad revenues are eaten up by sales and marketing expenses.”